More asset owners globally are taking diversity more seriously internally within their organisations, in respect of how they, with their investment consultants, assess external fund managers and in respect of how investee companies are dealing with the issue, according to research by think-tank New Financial in collaboration with the UK’s Pensions and Lifetime Savings Association (PLSA).
New Financial said its report looked at how and why asset owners, such as pension funds, insurers and sovereign wealth funds, approach diversity (in the people sense of the word rather than in terms of investment diversification), because asset owners are an essential source of capital for financial markets, and their needs and actions have a big impact on how the whole system operates.
It researched 100 asset owners globally with combined assets of more than US$8 trillion and conducted more than 40 interviews with a wide range of investment market participants. The research found that three-quarters of the asset owners surveyed mentioned diversity in their annual reports, and nearly half (45%) expressed their motivations for tackling diversity. The top three reasons given were to improve decision making, to attract and retain talent, and to innovate and compete.
The PLSA launched its Breaking the Mirror Image campaign in March this year to support, lead and encourage a more diverse workplace pensions sector. Luke Hildyard, the PLSA’s policy lead on corporate governance and stewardship, speaking at Manifest’s seminar this week, noted that pensions trustee boards were overwhelmingly composed of older white men. New Financial’s report stated that PLSA’s 2017 annual survey found that 83% of UK trustees were men while research by Aon Hewitt and Leeds University this year found that the average trustee age was 54 years old and had served for 10 years. However, the UK is not unique with New Financial quoting research into the Dutch pensions sector that found of the 200 largest schemes in 2014 35% had no female representation on their boards and 60% lacked any trustees under 40.
New Financial found that some US public pension funds are allocating a portion of their portfolios to female or minority owned or managed funds which the report suggested would be a signal to the wider investment community that they needed to ensure they take internal diversity seriously. Reviewing the approach of fund managers towards diversity in their investee companies New Financial found that the largest global passive managers – Blackrock, State Street and Vanguard – had taken action on diversity by voting against companies with poor disclosure and calling for more women on company boards. Other fund managers such as Hermes and Aviva fund managers have included diversity as an issue for their overall stewardship and engagement activities.
Last Updated: 3 November 2017